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RETIREMENT PLANS | 12 Months Ended
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Sep. 30, 2024
Retirement Benefits [Abstract] |
RETIREMENT PLANS | RETIREMENT PLANS The Company maintains certain non-contributory defined benefit pension plans (collectively, referred to as the “pension plans”) covering eligible employees in the U.S. and in other certain countries such as Canada, France, Germany and the United Kingdom. These pension plans generally provide benefits to employees based on formulas recognizing length of service and earnings. The Company’s funding policy is to contribute actuarial-determined amounts allowable under tax and statutory regulations for the qualified plans. The Company uses a September 30th measurement date for its defined benefit pension plans. The Company also sponsors other post-retirement pension plans for its employees in the U.S. and in Canada (collectively, referred to as the “post-retirement pension plans”). Other post-retirement pension plans are non-contributory health care and life insurance plans. The components of net periodic pension benefit cost (income) for the pension plans at the end of each fiscal year consisted of the following (in millions):
| Defined Benefit Pension Plans
| 2024 |  | 2023 |  | 2022
| U.S. Pension Plans |  | Non-U.S. Pension Plans |  | U.S. Pension Plans |  | Non-U.S. Pension Plans |  | U.S. Pension Plans |  | Non-U.S. Pension Plans
Service cost | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | 3 |
Interest cost | 1 |  |  | 8 |  |  | 1 |  |  | 7 |  |  | 4 |  |  | 4 |
Expected return on plan assets | (1) |  |  | (7) |  |  | — |  |  | (7) |  |  | (6) |  |  | (7) |
Amortization of net loss | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | 1 |
Settlement (gain) loss (1) | — |  |  | — |  |  | (9) |  |  | — |  |  | 22 |  |  | — |
Net periodic pension benefit cost (income) | $ | — |  |  | $ | 3 |  |  | $ | (8) |  |  | $ | 3 |  |  | $ | 20 |  |  | $ | 1 |
(1) Effective June 30, 2021, the Company terminated the Esterline Retirement Plan (the “ERP”) in accordance with regulatory requirements. P ension obligations were distributed through a combinat ion of lump sum payments (using existing plan assets) to eligible plan participants and the purchase of a group annuity contract in fiscal 2022. During the third quarter of fiscal 2022, the Company transferred the remaining benefit obligations to an insurance company to purchase a group annuity contract. In connection with the transfer, a settlement loss of approximately $22 million was recorded as a component of other (income) expense in the consolidated statements of income in fiscal 2022. Upon the finalization of the group annuity purchase funding during fiscal 2023, a settlement (gain) of approximately $(9) million was recorded as a component of other (income) expense in the consolidated statements of income in fiscal 2023. No settlement (gain) or loss was recorded in fiscal 2024. Net periodic pension benefit cost for the post-retirement pension plans was less than $1 million for each of the fiscal years ended 2024, 2023 and 2022, respectively. The components of net periodic pension benefit cost other than service cost are included in other (income) expense in the consolidated statements of income. The changes in benefit obligations and plan assets, funded status and amounts recognized in the consolidated balance sheets and accumulated other comprehensive loss for the post-retirement plans at September 30, 2024 and 2023 were not material. The changes in benefit obligations and plan assets, funded status and amounts recognized in the consolidated balance sheets and accumulated other comprehensive loss for pension plans at September 30, 2024 and 2023, were as follows (in millions):
| Defined Benefit Pension Plans |
| September 30, 2024 |  | September 30, 2023 |
| U.S. Pension Plans |  | Non-U.S. Pension Plans |  | U.S. Pension Plans |  | Non-U.S. Pension Plans |
Benefit Obligations |  |  |  |  |  |  |  |
Beginning balance | $ | 12 |  |  | $ | 144 |  |  | $ | 15 |  |  | $ | 148 |  |
Currency translation adjustment | — |  |  | 5 |  |  | — |  |  | 8 |  |
Service cost | — |  |  | 2 |  |  | — |  |  | 2 |  |
Interest cost | 1 |  |  | 8 |  |  | 1 |  |  | 7 |  |
Actuarial loss (gain) | — |  |  | 15 |  |  | (1) |  |  | (13) |  |
Plan amendments | — |  |  | 3 |  |  | — |  |  | — |  |
Benefits paid | (1) |  |  | (9) |  |  | (3) |  |  | (8) |  |
Ending balance | $ | 12 |  |  | $ | 168 |  |  | $ | 12 |  |  | $ | 144 |  |
Plan Assets - Fair Value |  |  |  |  |  |  |  |
Beginning balance | $ | 8 |  |  | $ | 139 |  |  | $ | 9 |  |  | $ | 133 |  |
Currency translation adjustment | — |  |  | 5 |  |  | — |  |  | 6 |  |
Realized and unrealized gain on plan assets | 1 |  |  | 25 |  |  | 11 |  |  | 6 |  |
Company contributions (refunds) | 1 |  |  | 5 |  |  | (9) |  |  | 2 |  |
Benefits paid | (1) |  |  | (9) |  |  | (3) |  |  | (8) |  |
Ending balance | $ | 9 |  |  | $ | 165 |  |  | $ | 8 |  |  | $ | 139 |  |
Funded Status |  |  |  |  |  |  |  |
Fair value of plan assets | $ | 9 |  |  | $ | 165 |  |  | $ | 8 |  |  | $ | 139 |  |
Benefit obligations | (12) |  |  | (168) |  |  | (12) |  |  | (144) |  |
Net amount recognized | $ | (3) |  |  | $ | (3) |  |  | $ | (4) |  |  | $ | (5) |  |
Amount Recognized on Consolidated Balance Sheets |  |  |  |  |  |  |  |
Other non-current assets | $ | — |  |  | $ | 13 |  |  | $ | — |  |  | $ | 12 |  |
Accrued and other current liabilities | — |  |  | — |  |  | (1) |  |  | — |  |
Other non-current liabilities | (3) |  |  | (16) |  |  | (3) |  |  | (17) |  |
Net amount recognized | $ | (3) |  |  | $ | (3) |  |  | $ | (4) |  |  | $ | (5) |  |
Amounts Recognized in Accumulated Other Comprehensive Loss (Income) |  |  |  |  |  |  |  |
Net loss (gain) | $ | 1 |  |  | $ | (1) |  |  | $ | 1 |  |  | $ | 1 |  |
Prior service cost | — |  |  | 4 |  |  | — |  |  | 1 |  |
Ending balance | $ | 1 |  |  | $ | 3 |  |  | $ | 1 |  |  | $ | 2 |  |
The accumulated benefit obligation for all pension plans wa s $175 million and $152 million as of September 30, 2024 and September 30, 2023, respectively. Estimated future benefit payments expected to be paid from the pension and post-retirement pension plans or from the Company’s assets are as follows (in millions):
Fiscal Years Ended September 30, |  |
2025 |  | $ | 12 |
2026 |  | 12 |
2027 |  | 12 |
2028 |  | 13 |
2029 |  | 13 |
2030 - 2034 |  | 66 |
The expected funding requirement in fiscal 2025 for the non-U.S. pension plans and the U.S. pension plans maintained by the Company is not material.
| U.S. Defined Benefit Pension Plans |  | Non-U.S. Defined Benefit Pension Plans
Principal assumptions as of year end | 2024 |  | 2023 |  | 2024 |  | 2023
Discount rate | 5.20% |  | 5.25% |  | 4.74% |  | 5.56%
Rate of increase in future compensation levels | N/A (1) |  | N/A (1) |  | 3.24% |  | 3.19%
Assumed long-term rate of return on plan assets | 6.00% |  | 5.37% |  | 5.42% |  | 5.41%
(1)As a result of the plan freeze to the ERP during fiscal 2021, for all future benefit accruals and participation by new or rehired employees on or after January 1, 2021, the assumed rate of increase in future compensation levels was not applicable as of September 30, 2024 and 2023, as pay increases are not valued once a defined benefit pension plan is frozen. The ERP settlement occurred in fiscal 2022. The Company uses discount rates developed from a yield curve established from high-quality corporate bonds and matched to plan-s pecific projected benefit payments. Although future changes to the discount rate and expected return on assets are unknown, had the discount rate and expected return on assets increased or decreased by 25 basis points, the impact on the fiscal 2024 net periodic benefit cost is not material. Management is not aware of any legislative or other initiatives or circumstances that will significantly impact the Company’s pension obligations in fiscal 2025. Plan assets are invested in a diversified portfolio of equity and debt securities consisting primarily of common stocks, bonds and government securities. The objective of these investments is to maintain sufficient liquidity to fund current benefit payments and achieve targeted risk-adjusted returns. Management periodically reviews allocations of plan assets by investment type and evaluates external sources of information regarding the long-term historical returns and expected future returns for each investment type. Allocations by investment type are as follows:
|  |  |  | Actual
Plan assets allocation as of fiscal year end |  | Target |  | 2024 |  | 2023
Return-seeking assets (e.g., equity securities and real estate) |  | 35% - 55% |  | 46.0% |  | 42.7%
Fixed-income securities (e.g., debt securities) |  | 45% - 65% |  | 53.8% |  | 56.0%
Cash |  | 0% |  | 0.2% |  | 1.3%
Total |  |  |  | 100.0% |  | 100.0%
The following table presents the fair value of the Company’s pension plan assets as of September 30, 2024 and 2023, segregated by level within the fair value hierarchy as described in Note 18, “Fair Value Measurements” (in millions):
|  | Fair Value Hierarchy
|  | September 30, 2024 |  | September 30, 2023
Investments measured at fair value by level: (4) |  |  |  |
Level 1 (1) |  | $ | 39 |  |  | $ | 29 |
Level 2 (2) |  | 47 |  |  | 40
Investments measured at net asset value (3) |  | 88 |  |  | 78
Total |  | $ | 174 |  |  | $ | 147 |
(1) Level 1 investments include return seeking assets, which are primarily equity securities and real estate, are actively traded on U.S. and non-U.S. exchanges and valued using the market approach at quoted market prices on the measurement date or at the net asset value of the shares held by the plan on the measurement date based on quoted market prices. Includes cash and cash equivalents which is used to pay benefits and cash invested in a short-term investment fund that holds securities with values based on quoted market prices, but for which the funds are not valued on quoted market basis. (2) Level 2 investments include fixed-income securities, which are primarily debt securities, are primarily valued using the market approach at either quoted market prices, pricing models that use observable market data, or bids provided by independent investment brokerage firms. (3) These investments are valued at the net asset value (“NAV”) of units held. The NAV is used to estimate fair value and is based on the fair value of the underlying investments held by the fund less its liability. (4) No investments measured using Level 3 inputs. Defined Contribution Plans The Company sponsors certain defined contribution employee savings plans that cover substantially all of the Company’s U.S. employees. Under certain plans, the Company contributes a percentage of employee compensation and matches a portion of employee contributions. The cost recognized for such contributions for the fiscal years ended September 30, 2024, 2023 and 2022 was approximately $45 million, $34 million and $30 million, respectively.

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 710 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/710/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 712 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/712/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 715 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/715/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/718/tableOfContent + Details
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